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It's just a little rubber grommet to keep the wire from rubbing against the metal. It's not going to arc without it. Those things always break and deteriorate from age. Don't worry about it - the insulation on the wire is what's really important, that thing was just there to protect the insulation. When you do get it all back together, you can wrap something else around the wire - like a cut scrap of insulation from larger wire - to protect that rubbing point and tuck it in there and secure with zip ties.
-Ian
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