Fox Upgraded Alternator/ Steering Column Smoke - Help/ Advice Needed

Ordered 130 Amp alternator upgrade from late model restoration and installed it yesterday, when I started the car the amps were super high and the needle was trying to jump out of the top of the voltage gauge, battery light was on. Just before I turned the car off I saw smoke from the steering column. Talked to Late model resto and they told me to get the alternator test, tested at advanced auto and showed alternator was bad. They are sending me another but my main concern here is the smoke from steering column. I did look at other posts and folks mention the ignition switch which I replaced months ago with a new one from autozone because the car could be started without a key. I also replaced the multifunction switch wiring, pigtail and another connector to fix my headlights a while back, all of this wiring came from late model resto too. Late model is saying that it has to be some other issue but the car was fine before I installed their alternator upgrade kit. Alternator was hot as lava and I only ran the car for less than 2 minutes. Can this happen due to a faulty voltage regulator?
 
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Let me take a wild guess- you reinstalled the orange/black power wires from the stock 2g alternator to the post on the back of the 3g alternator.

You should never do that and yes the instructions from LMRS are wrong IMO. You need a dedicated 4 gauge power wire with a 125 amp inline fuse going directly from the + post on the back of the alternator to either the + battery post or the hot side of the starter solenoid. You also need to add an additional 4 gauge ground wire from the block to the ground post behind the battery or to the chassis. Did you also check the fusible links located by the solenoid dedicated to the alternator to see if they are fried.

The only wire you reuse from the stock 2g power plug is the white/green stator wire. What is their alternator upgrade kit?
 
Bingo

What happened is electricity seeks the path of least resistance- the stock power wires are not meant for that amperage and you smoked your wiring. Disconnect them and tape them off. Only use the 4 gauge power wire.

I would also check for shorts and proper grounds. You need to install an extra 4 gauge ground wire as mentioned.

Their faulty instructions have been discussed many times here. Do a search for "3g install"
 
Thanks Mike, when I installed it I watched the video and backed it up several times before I installed orange/ black wires along with the 4 gauge wire because it seemed not to make sense to me but it clearly shows the guy adding them back on. Hopefully it did not do to much damage and I can get it all back together once they replace the bad alternator.
 
Here is the reasoning behind using only a single 4 gauge fused power feed to the alternator. If you use the two 10 gauge black/orange wires in addition to the 4 gauge wire, you have two fused power feed paths. The total current capacity of the wiring is the sum of the fused paths. The 4 gauge path is fused for 125 amps, and the two 10 gages wires are fused for 60 amps. That is a total of 185 amps, which exceeds the capacity of the alternator. Overload can occur without the fuses blowing, damaging the alternator.

The worst case scenario is that the alternator develops an internal short to ground resulting in a catastrophic failure. The initial short circuit surge current is limited by the resistance of the wiring. The current in a parallel circuit divides up according to the resistance of the branches. If the 4 gauge fuse opens up first, the two 10 gauge black/orange wires will be carrying the short circuit surge current. Depending on the time lag of the fuse links, they may open up before a fire starts or they may not.


3G Alternator Install: A How To | Mustang Forums at StangNet

Alternator wiring.

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If you have a 3G alternator, the white/ yellow wire is critical to proper operation. It is the voltage sense and regulator power lead that picks up the difference in voltage at the alternator output stud and the connection point at the starter solenoid. If you cheat and run it directly to the alternator output, it sees the voltage at the alternator output stud. It does not see the voltage at the starter solenoid connection point where it feeds power to everything else. You may have a voltage drop in the wiring between the alternator output stud and the connection to the starter solenoid. Thus you may have low voltage or less than the standard regulated voltage at the starter solenoid connection point. This makes for low voltage throughout the rest of the car: everything operates at less than full efficiency.

Starter solenoid wiring 86-91 model cars.

Connect the fused 4 gauge wire to the alternator and the battery side of the starter solenoid.
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Starter solenoid wiring 92-93 Model cars.
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