This doesn't make any sense. There are almost certainly provisions in the law for backup generators to be connected to the service panel with a transfer switch, either manual or automatic. The idea is that when the generator is powering the house, the powerline service is completely disconnected, and vice versa. This is standard stuff, part of every electrical code I've ever heard of.

If a state legislature doesn't allow backup power to be supplied to a home or business with an NEC-compliant transfer switch, there should be some kind of judicial recourse. I'd spend some quality time with an attorney before taking "No" for an answer.