In your situation the TSSA is wrong. However you may be confusing them with your terminology. A dryer vent is a moisture-exhaust duct, not a vent.
There are 2 clauses to follow regarding moisture-exhaust ducts. Clause 7.4.4 is for commercial-type clothes dryers. Clause 7.5.2 is for domestic-type clothes dryers. I'm assuming you have a domestic-type clothes dryer. In any case the distance to the pressure regulator vent outlet is the same. With commercial-type clothes dryers we need 10' to a fresh air intake, instead of 3' for a domestic-type clothes dryer.
Quote(Clause 7.4.4) A dryer shall be connected to a metal moisture-exhaust duct that terminates outdoors not less than 3' from any pressure regulator vent termination and not less than 10' from a fresh-air intake.
Quote(Clause 7.5.2) A moisture-exhaust duct shall not terminate within 3 ft (1m) in any direction of any pressure regulator vent termination or fresh-air intake.
Clause 7.5.2 is clear, "shall not terminate within 3' in any direction of any pressure regulator vent termination." They may be refering to the old Clause 7.5.2,
QuoteA moisture-exhaust duct shall not terminate within 3' in any direction of a service regulator or fresh-air intake.
This was amended in 2007 to clearly state "in any direction of any
pressure regulator vent termination. Notice how they also changed the word service regulator to pressure regulator. I am unclear as to why they changed service regulator to pressure regulator, but it's irrelevant as Clause 5.5.9 states,
Quote(Clause 5.5.9) The discharge from relief devices shall terminate outdoors with clearances specified in Table 5.2.
QuoteRelief Device: A device designed to open to prevent a rise of gas pressure in excess of a specified value due to an emergency or abnormal conditions.
QuotePressure Regulator: A device, either adjustable or nonadjustable, for controlling and maintaining, within acceptable limits, a uniform outlet pressure.
QuoteService Regulator: A pressure regulator installed on a service line to control the pressure of the gas delivered to the customer.
Extending the regulator vent is the correct option. OPCO regulators will not reduce the clearance requirements to either a dryer vent or the 3' horizontal clearance required for an appliance vent. Keep in mind, only the gas distributor can make those modifications to the regulator, as per Clause 4.6.2.
Quote(Clause 4.6.2) No person other than an employee or person authorized by the supplier or distributor shall perform alterations, repairts, tests, services, changes, installations, connections, or any other type of work on the supplier's or distributor's system.
I would let the distributor extend the regulator vent outlet, and assume liability.
The issue with clearance to a moisture-exhaust duct isn't with the regulator or meter, but with the regulator vent outlet.
Using your picture as an example, if the dryer moisture-exhaust duct were a gas appliance exhaust vent, Clause 8.14.8(d) states,
Quote(Clause 8.14.8 Subsection D) A vent shall not terminate, above a meter and regulator assembly within 3ft (900mm) horizontally of the vertical centerline of the regulator vent outlet to a maximum vertical distance of 15ft (4.5m);"
Above a meter and regulator means the vertical area above a horizontal plane, measured 3ft to the left and right of the regulator vent outlet. This is probably where the confusion is taking place. A moisture exhaust duct does not need to follow the 3' horizontal, 15' vertical rule. Only a vent must follow that rule. A vent is defined as follows,
QuoteVent — that portion of a venting system designed to convey flue gases directly to the outdoors from either a vent connector or an appliance when a vent connector is not used.