Okay, this is a common and tricky situation. Here's the breakdown of the issues and code references, and why reducing the conductor size as you propose is generally NOT compliant despite the short nipple.

The Core Issue: Ampacity and Continuous Load

The problem isn't just the derating. It's the fact that you're dealing with a circuit that's already been derated due to multiple conductors in a raceway. Reducing the conductor size after that derating, even in a short nipple, violates the fundamental principles of circuit protection.

Code References & Explanation1. 110.3(B) - Installation and Use

“Listed or labeled equipment shall be installed and used in accordance with any instructions included in the listing or labeling.” This applies to your switchgear. The switchgear is listed and labeled for conductors of a certain ampacity.2.

240.3 - Protection of Conductors

“Conductors...shall be protected against overcurrent in accordance with their ampacities as specified in 310.14.” This is the cornerstone. You must protect the conductors at their full ampacity, as calculated considering all factors before entering the short nipple.3.

310.14(C) - Termination Provisions

This section dictates the temperature rating that must be used when selecting the ampacity of your conductors, based on the terminations. Assuming the switchgear terminations are rated 75°C, you would have to use the 75°C column for your 500 kcmil conductors, which gives you 380A.4.

310.15(C)(1) - Adjustment Factors

This is where your initial derating comes in. You are correctly applying the adjustment factors for the number of current-carrying conductors in the raceway before the nipple.

Why Your Proposal Fails The 1800A OCPD

The 1800A overcurrent protective device (OCPD) is the crux of the problem. The OCPD must protect the entire circuit, not just the section after the nipple. Because you derated your 600 kcmil conductors in the raceway to a final ampacity of 1900A (5 runs x 380A), the 1800A OCPD is providing the required overcurrent protection. However, reducing to 500 kcmil (380A @ 75°C x 5 runs = 1900A), in this case, does not cause an overload and is unlikely to cause the breaker to trip. The 1800A OCPD is far greater than the ampacity of the smaller conductor at the 75°C termination rating.

Ignoring the Derating History

You can't "reset" the ampacity calculation simply because you're in a short nipple. The conductors have already been subjected to heat from other current-carrying conductors in the raceway before they enter the nipple. Even though the nipple itself doesn't require further derating, the conductors are already operating at a reduced ampacity due to the original raceway conditions.

What CAN You Do?

Here are the options, assuming you absolutely must make this work in the existing setup:1. Reduce the OCPD Size (If Allowed)

This is the most likely solution. If the load calculations (220.100) permit it, you could reduce the size of the OCPD. You would need to perform a load calculation to confirm that the load is no more than 80% of the OCPD rating, in accordance with 215.3. The OCPD would have to be 1900A or less. However, this assumes your switchgear is rated for that size breaker. It probably is, but needs to be checked.
2.

Modify the Switchgear (Extremely Unlikely)

The best solution is to make modifications to the switchgear. It might be possible to cut back the existing bus bars and install new lugs for the 600 Kcmil conductors. Depending on available space, this may require some costly custom work.3.

Engineering Judgement This is not a solution. If an engineer stamps off on this design, they are responsible for everything that happens as a result. They would be opening themselves up to a world of liability if anything bad happened.

In Summary

Reducing conductor size after derating due to multiple conductors in a raceway is not compliant with the NEC. It violates the fundamental principle of protecting conductors according to their full, properly derated ampacity, and is likely a violation of 240.3. The only viable solutions are to reduce the OCPD size (if possible) or modify the switchgear connections to accommodate the larger conductors.Always consult with a qualified electrical engineer or inspector to ensure compliance with local codes and safe practices. Flag for review