1Place tomatoes, onion, jalapeno, and water into the bowl of a blender; blend until smooth. Heat 1/4 cup canola oil in a saucepan over medium heat. Carefully stir in tomato puree, and cook for 15 minutes until thickened.
2While the sauce is cooking, season the shredded potato to taste with salt, pepper, and hot pepper sauce. Mix in onion, eggs, and jalapeno; sprinkle with flour and mix until thoroughly combined. Heat canola oil in a large skillet over medium-high heat.
3Drop potato mixture into hot oil by the heaping tablespoon. Flatten slightly, and cook until golden brown on both sides, about 2 minutes per side. Drain on paper towels, and continue with remaining potato mixture. Serve the potato pancakes with sauce spooned overtop.