In a large bowl, combine ground beef, bread crumbs, parsley, Parmesan, 1/4 teaspoon black pepper, garlic powder and beaten egg. Mix well and form into 12 balls. Store, covered, in refrigerator until needed.
In a large saucepan over medium heat, saute onion and garlic in olive oil until onion is translucent. Stir in tomatoes, salt, sugar and bay leaf. Cover, reduce heat to low, and simmer one hour. Stir in tomato paste, basil, 1/2 teaspoon pepper and meatballs and simmer 30 minutes more. Serve.