For sauce, in a blender container or food processor bowl combine peppers and garlic; cover and process until nearly smooth. Add 1/2 cup of the water, the basil, tomato paste, vinegar, sugar, the 1/8 teaspoon salt, and cayenne pepper. Cover; blend or process with several on-off turns until mixture is nearly smooth. Transfer to a small saucepan; cook over medium heat, stirring frequently, until heated through.
Meanwhile, rinse fish; pat dry with paper towels. Measure thickness of fish. Cut fish into 4 serving-size pieces. In a large skillet bring the remaining 1/2 cup water and half of the lemon slices just to boiling. Carefully add fish. Return just to boiling; reduce heat. Cover and simmer for 4 to 6 minutes per 1/2-inch thickness of fish or until fish flakes easily when tested with a fork. Gently pat tops of fish dry with paper towels. Sprinkle fish lightly with the 1/4 teaspoon salt and lemon-pepper seasoning.
Spoon the sauce onto dinner plates. Place the fish on top of sauce. Garnish with remaining lemon slices. Makes 4 servings.