First, my understanding on this point has always matched ggunn's, electrofelon's, and jaggedben's. However, as devil's advocate for the moment, I'm not sure that the AHJ here is wrong, given the NEC as written. Parsing the beginning of (2020) 705.12 line by line, the interpretation goes like this (and so others can comment on whether any of the points are rebuttable):
- 705.12 Load-Side Source Connections. The output of an interconnected electric power source shall be permitted to be connected to the load side of the service disconnecting means of the other source(s) at any distribution equipment on the premises.
The PV breaker in the MLO service panel can be considered a service disconnecting means. Then the interconnected electric power source is in fact connected on the load side of that service disconnecting means. The term "distribution equipment" is general and includes service equipment.
And actually I don't think this point matters at all, as I don't see anything limiting the scope of the rest of 705.12 to configurations where the permission in the first sentence is used. So I think just the next point matters:
- Where distribution equipment or feeders are fed simultaneously by a primary source of electricity and one or more other power source and are capable of supplying multiple branch circuits or feeders, or both, the interconnecting equipment shall comply with 705.12(A) through (E).
The MLO service panel is distribution equipment and is fed simultaneously by two sources. So its busbar much comply with 705.12(B)(3).
Cheers, Wayne