Percent-encoding in host

I apologize for raising this issue so late in the process, but I'm confused by the sentence in the last paragraph of section 3.2.2 that reads, "URI producing applications must not use percent-encoding in host unless it is used to represent a UTF-8 character sequence." From the context, a "UTF-8 character sequence" seems to apply only to non-ASCII characters.  Is the rule effectively that you're not allowed to percent-encode ASCII characters in host?
If that's the case, what's the proper way to represent characters in the <sub-delims> set that appear in <reg-name> as data, not as delimitters?
 
Dave