Do mods affect power level?

Is there something in my teeth?

They do to a small degree but I haven't been able to figure out how exactly. I've noticed my power rating moving up and down slightly depending on the mod equipped but no where near as much as it should in reality given how much mods actually add.

Mods should add very directly to the power level so we can see that that 38k arena team is actually 38k and not 45k in disguise.

It does. If you have your characters sorted by power level and add mods to one, that character will pass others. At least that is what I saw.

I also removed mods from some of my characters to use them on characters for the mod challenges. When I would take them off one, they would fall behind others as far as power level.

Having said that though, they don't effect power nearly as much as they should. They did when they first came out because my arena team was up over 41K. But after the nerf it's back down to 38K. Before mods came out it was between 37 - 37.5K depending on my lineup.

^ this

If you watch the the power ratings on your heroes as you add mods, you can see the power increase quite a bit. I'm still hoping the final GW nodes can be better matched with some fixing, because it feels like the reason those teams are SO intensely higher powered is because of their mods, which begs the question, is GW matchmaking including the power difference from mods yet?