czars said:
... He has a sub-panel in his garage which will also be changed to a panel with seperate ground and neutral connections. ...
If we retain the present feeder (without a ground conductor), what is the proper method to provide a ground at the subpanel. Is the connection to the cold water pipe sufficient? Should we also install a new ground rod at the garage? What can we do without installing a new feeder cable?
I am going to follow George's lead on the appropriateness of answering this question.
However the above question strongly indicates a flawed understanding of grounding.
The most important aspect of what we call 'grounding' has nothing to do with ground at all. Instead it is the intentional _bonding_ of all conductive metal bits that are not intended to carry current, in order to provide an 'effective path' back to the source of supply. The idea is that in the event of a fault between a hot conductor and some random chunk of metal (say a water pipe) you will get a short circuit that will trip the breaker, rather than an energized chunk of metal.
An important feature of this bonding is that we have turned things that are not intended to carry current into good potential circuit paths. So the next part of bonding design is to mitigate any 'objectionable current' on the bonded metal. This means eliminating multiple connections between the electrical system and the bonded metal. If there is _one_, but only _one_ connection between the electrical system and the bonded metal, then there will be no closed circuit that includes the bonded metal, and thus no current flow on the bonded metal.
This boils down to (but only roughly): at the service the electrical system neutral is connected to both an earth grounding electrode, and to all of the bonded metal. At all other points in the electrical system, the bonded metal is maintained electrically isolated from the electrical system neutral. Generally this means that subpanels have a _separate_ ground and neutral, and feeders to the subpanel have separate neutral conductors (more correctly called _grounded conductors_) and ground wires (more correctly called _equipment grounding conductors_).
There is an exception: for detached structures, if there are no _bonded_ metallic paths between the structures, you are permitted to bond the neutral to your bonded metal. In essence the neutral itself is used as the effective path between the buildings. However this also means that the earth itself is a 'parallel path' between the structures, and some amount of the 'neutral current' will end up flowing through the earth. If there is ground fault protection on the service or the feeder, then you can't do this, and if there is a solid metallic path between the two structures, then you cannot do this.
So, what to do:
1) Put in a new feeder which has separate ground and neutral. Take this chance to bury a conduit to help with future repair and expansion.
2) Eliminate any bonded metal between the two structures; possibly with a length of plastic in the underground water line.
3) Somehow re-apply the current three wire feeder to have separate hot, neutral, and ground conductors.
-Jon