Cook sausage in a skillet over medium heat until no pink remains, drain the fat and return the sausage to the pan. Add the peppers and cook until slightly tender, about 3 minutes. Set aside to cool.
Whisk eggs, milk, cream, dry mustard, salt, pepper, and onion powder in a large bowl (add ½ teaspoon black pepper if desired).
Add the bread, peppers, sausage, and half of the cheese to the egg mixture. Toss to combine and let rest for 5 minutes. Toss again until the liquid is absorbed.
Add the mixture to a greased 2 qt baking dish. Cover with foil and refrigerate for at least 30 minutes or up to 48 hours.
Preheat the oven to 350°F. Bake covered for 30 minutes. Uncover, top with remaining cheese, and bake an additional 15-20 minutes or until set in the middle.
Rest 10 minutes before cutting.
