Hey, stupid question time: Is it cool to install a disconnect between the meter and your main circuit breaker panel? If I had one I could disconnect power to my panel without having to call the utility! Or is that illegal for some reason?
Sure - this is done in many cases (I've seen it a lot in California where outdoor disconnects are preferred/required and the larger panel is indoors). In this case, that disconnect becomes your "service equipment" and the main panel becomes a subpanel of that service equipment, requiring a four-wire feed and grounds/neutrals be separated.
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Hmmm. I'm just a very little bit skeptical, E'fan and Flasher. Looking closely at the provided photo, it seems that what is showing is a discolored anti-oxidant...except that looking at the base of the opposite lug, the anti-ox seems to be the same color. Now, if that's so it certainly could be that heat is what caused the discoloration - and the mild amount of 'grease-spreading' that also shows. But mightn't it more innocently simply be aging of the anti-ox?
You can definitely see the anti-ox discolored. I don't think it's just aging, unless the anti-ox wasn't applied to the other conductor, was applied at a different time, or was applied very, very poorly - you would see the same aging appear on the other lug and conductor. Further up the conductor you can see where two very small spots of anti-ox have discolored, and you can see signs of heat making the grease spread more than the other conductor. I can say with almost assured certainty that there was a heating issue there (and for what it's worth, the installer nicked the metal conductors more than I would like - you can see the nicks where the anti-ox is discolored).
Was it minutes from a fire? Probably not. I don't see insulation compromised or any plastic melting. But I believe those are signs of heat and it sounds like the electrician was concerned enough to re-terminate it and replace the breaker.
Peripherally, a number of the lug sites I inherited (Alaska) have been affixed with what looks like silicone caulk; very obviously to maintain torque. I've not seen that in more...ummm...civilized locations. Would that be silicone and is it NEC-kosher?
If it's listed for the purpose, then it's NEC-kosher. The NEC doesn't require nor disallow materials as long as they're listed for the purpose. Contrary to what a lot of electricians believe, anti-ox isn't even required unless installation instructions demand it (NEC 110.3). Most new CO-AL rated terminations work fine without it, but a lot of electricians treat it anyway (belt and suspenders and all).
That said, at the torques required here, I'm not sure the equivalent of Loctite will do much to keep the torque.