>How can this be legal in the first place?

It's almost certainly not (statutes that make it illegal to tap into your neigbor's electricity downstream of the meter could easily be warped for this use case). However, a combination of factors could make that a non-issue in the short term for the Prius driver.

1) The people who enforce the law usually don't enforce it to it's fullest against middle aged white men driving Priuses.

2) Most people in a position to screw the driver over for the laws he's violating aren't well versed in that niche of the law. The probably just look the Prius and go "WTF did I just see".

3) This guy might have some connections that help out in keeping enforcement from looking his way.

4) Something else I'm not thinking of.