I don?t have the 2014 edition so I?m not sure what 250.32(B), Exception No. 1 is,
I think your statement needed clarification when you said equipment suitable for use for a service was only required when the source was a utility service.
You are correct. Thanks for clarifying. I've included 250.32(B)(1), Exception No. 1 and 2, and the handbook commentary for 225.36 for context.
250.32
(B) Grounded Systems.
(1) Supplied by a Feeder or Branch Circuit. An equipment
grounding conductor, as described in 250.118, shall be run with
the supply conductors and be connected to the building or structure
disconnecting means and to the grounding electrode(s ). The
equipment grounding conductor shall be used for grounding
Exception No. 1: For installations made in compliance with
previous editions of this Code that permitted such connection,
the grounded conductor run with the supply to the building
or structure shall be permitted to serve as the ground-fault
return path if all of the following requirements continue to
be met:
(1) An equipment grounding conductor is not run with the
supply to the building or structure.
(2) There are no continuous metallic paths bonded to the
grounding system in each building or structure involved.
(3) Ground-fault protection of equipment has not been installed
on the supply side of the feeder(s).
If the grounded conductor is used for grounding in accordance
with the provision of this exception, the size of the grounded
conductor shall not be smaller than the larger of either of the
following:
(1) That required by 220.61
(2) That required by 250.122
Exception No. 2: If a building or structure is supplied by a
feeder from an outdoor transformer, a system bonding jumper
at both the source and the first disconnecting means shall be
permitted if doing so does not establish a parallel path for the
grounded conductor. If a grounded conductor is used in this
manner, it shall not be smaller than the size specified for the
system bonding jumper but shall not be required to be larger
than the ungrounded conductor(s). For the purposes of this
exception, connection through the earth shall not be considered
as providing a parallel path.
225.36 Hdbk Commentary
This section was revised for the 2014 Code. The feeder or branch circuit
disconnecting means is required to be suitable for use as service
equipment only where the feeder grounded conductor is also
used as the return path for ground-fault current per 250.32(B)(1),
Exceptions No. 1 and No. 2. The exception permitting a three- or
four-way snap switch to be used as a disconnecting means for an
outside branch circuit or feeder was deleted because it would not
provide a positive indication that the circuit was disconnected.