That wire had some current running through it.
Regardless of positive or negative ground, your complete electrical system needs to be "earthed" to the same electrical point (ground). The generator ground needs to be the same as the regulator ground. With your battery disconnected, you should be able to use an ohm meter to be certain the generator frame and the regulator earth have close to 0 ohms. Depending on the accuracy of your meter, you may find some resistance there, but it should be no more than a few ohms.