Glider PPG license necessary for USA utility certificated motorglider?

Hi all, My question is, My husband is in the process of getting a standard AWC for his imported, into the US, Dimona H36 TMG. He applied to have it certificated as a glider (powered), but our FAA inspectors want to put Utility on the AWC because that's what's on the type certificate.
Does this mean that the pilot would not strictly require a PPG w/ self launch endorsement, but instead could do with an ordinary power pilot license PPL? We were assuming none of our friends could legally fly it with their PPLs, but if its certified utility like some of their own airplanes, why not?

Thanks if anyone can point me to the right reg or had experience with this,

Kristin