Cut chilies open. Discard sterns and seeds. Cut chilies into small pieces with scissors or a knife. Place in bowl; cover with boiling water. Let stand 45 to 60 minutes. Drain.

To peel tomatoes, dip them in boiling water for 30 seconds; plunge into cold water. Slip skins off. Quarter tomatoes. Place in blender container; cover and blend till nearly smooth. Measure 2 cups of the blended tomatoes; return to blender container (or place canned tomato puree in blender container). Add the drained chilies or chili powder or crushed red pepper. Add onion, garlic, salt, and sugar; cover and blend till smooth.

In 1 1/2-quart saucepan combine tomato mixture and cooking oil. Cook and stir over medium heat about 10 minutes or till sauce is slightly thickened.