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What is the engine doing when it shorts? Running straight, through curves, switches? Need more information to be able to help much.
That locomotive is about 30 years old. Insulation may have flaked off or worn off a wire, and it shorts when it touches metal.
(1) Run the locomotive with a different tender. If it doesn't short, the problem is in the tender. First, check the connection at each pick-up roller. It's in a tight spot. If the connection is loose, that's the problem. If not, remove the body and check wires and connections inside.
(2) If the locomotive shorts, check the wires and connections. Start at the pick-up rollers. Then remove the body and check wires and connections at the motor, E unit, smoke unit and headlight. Run the locomotive WITHOUT the body and watch for a spark or a short.
(3) The thin copper "fingers" (contacts) on the E unit may be bent the wrong way. If so, bend them back or replace them.
(4) Some foreign object may have worked its way into the running gear. That can be hard to spot. It could be a tiny piece of metal.
(5) Cleaning and lubricating the motor and running gear is a good idea. Check the brushes and brush springs. If they are weak or worn, replace them.
Intermittent shorts are annoying. They are usually hard to track down. The best advice I can offer is Be Patient (easy to say; hard to do) and try one potential trouble spot after another.
GOOD LUCK!