You're right to be confused. The drawing you provided is problematic for a non-separately derived system (NSDS) generator with a 3-pole ATS. Let's break down why and address the NEC implications.

Understanding the Issue

The drawing shows: Neutral Conductor Sized per NEC 250.30(A)(3)

This suggests the generator is being treated, at least in this drawing, as a Separately Derived System (SDS). The sizing of the neutral conductor based on the phase conductors is required for separately derived systems.

Grounding Electrode Conductor (GEC) Connected to the Generator Neutral

This is typical for SDS, establishing a connection to a grounding electrode system at the generator.

Bonding Jumper at the Generator

Another SDS indicator.

3-Pole ATS

This is the critical conflict. A 3-pole ATS switches the phase conductors ONLY. The neutral remains continuous and connected to the utility. In an NSDS, the neutral is always connected to the service neutral.

Why this is Problematic for an NSDS with a 3-Pole ATS1. Parallel Neutral Paths

With an NSDS, the neutral conductor is intended to be connected to the service neutral. By grounding the generator neutral as shown, you create a parallel path for neutral current. This can lead to:

Circulating Neutral Currents

Current flows back to the source via both the utility neutral and the generator neutral/ground path. This can cause overheating, nuisance tripping of GFCI/AFCI devices, and electromagnetic interference (EMI).

Objectionable Current

Current flowing on the grounding system is considered objectionable.2.

Potential Difference

The grounding electrode system at the generator might be at a slightly different potential than the service grounding electrode system. This difference in potential, however small, can drive current through the grounding system.3.

Improper Overcurrent Protection Operation

Fault current paths are not clearly defined in the arrangement.

Is it Allowed under NEC 2017?No. The depicted configuration is generally not permitted for an NSDS generator with a 3-pole ATS under NEC 2017, unless very specific and unusual conditions are met (which are highly unlikely in a typical installation).Here's why, with relevant NEC 2017 articles: NEC 250.20(B): Alternating-Current Systems of 50 Volts to 1000 Volts. This states what systems need to be grounded. A premises wiring system is grounded if the supply voltage is between 50 and 1000 volts and one of the following apply (simplified): (1) Neutral conductor is required to be grounded, like in your case. The purpose is to limit voltages to ground. NEC 250.24(A): Grounding Service-Supplied Alternating-Current Systems. For an NSDS (which is connected to a service), the grounding connection must occur at the service disconnecting means. You can't generally create a second grounding point at the generator in an NSDS. NEC 250.6(A): Objectionable Current. This section explicitly forbids objectionable current from flowing over the grounding system. The parallel neutral paths created by the drawing violate this. NEC 250.30

This section covers Grounding Separately Derived Alternating-Current Systems. Since you have an NSDS with a 3-pole ATS, this section

DOES NOT APPLY. This is the most critical point. The drawing treats the generator as if it were a SDS, which it is not in this configuration.

What Should the Grounding Look Like for an NSDS Generator with a 3-Pole ATS?

The correct way to ground an NSDS generator with a 3-pole ATS is much simpler:1. Maintain the Neutral Connection

The generator neutral should be directly connected to the neutral of the electrical service.2.

Equipment Grounding Conductor (EGC)

Run an Equipment Grounding Conductor (EGC) from the generator frame to the service grounding system (typically back to the service equipment). This EGC ensures that the generator frame is properly grounded, providing a low-impedance path for fault current to return to the source.3.

No Grounding Electrode at the Generator

Do NOT connect a grounding electrode conductor (GEC) or a bonding jumper from the generator neutral to a ground rod, building steel, or other grounding electrode. This avoids the parallel neutral path problem.

In summary, the drawing you provided is incorrect and would likely violate the NEC for an NSDS generator with a 3-pole ATS. The grounding should be done via an EGC back to the service grounding system, without a local ground electrode connection at the generator neutral. You need to correct the drawing and the installation to comply with the NEC. Consult with a qualified electrical engineer or contractor to ensure the installation is safe and compliant. Flag for review