After being reminded of a traumatizing incident from his past in which he 'hurt' someone, eventually causing him to be boxed up
The episode begins with some background on Stephen and how everyone on the railway looks up to him. After causing trouble on the mainline, Sir Topham Hatt sends Diesel to work with Stephen in Ulfstead, hoping that wise Stephen will be able to teach Diesel a thing or two about railway safety. Unsurprisingly, Diesel ignores Stephen's advice, yet seems to be doing well on his own. Deciding he doesn't need to bother with Diesel, Stephen continues with his work.
The next day Stephen arrives at Ulstead Castle with Sir Topham Hatt in his cab, on his way to visit his friend Sir Robet Norramby. Upon arriving at the foot of the hill the castle resides on, Stephen finds Diesel half off of the rails, with his freight cars full of stone bricks to repair part of the castle that has weathered away all carelessly overturned. Diesel tries to threaten Stephen not to tell Sir Topham Hatt, only to discover that he is inside of Stephen. Sir Topham Hatt angrily scolds Diesel and tells him that if he does not learn to behave he will send him to work at the Smelter's Yard, which worries Diesel greatly.
Blaming Stephen for getting him in trouble, Diesel begins to think of a way to get back at Stephen. He reasons that since Stephen is something of a father figure to the other engines, he could get his revenge by tarnishing his reputation in front of the other engines. With his train back on the rails, Diesel arrives at the castle and stops for a moment for his trucks to be unloaded. Presently, he notices a small boy reading a book about historical railway accidents. Curious, he asks the boy what the very first accident on the railway was, to which he tells him about an accident in which a train called "The Rocket" hurt someone very badly. Realizing that this is Stephen, Diesel sees the perfect way to carry out his revenge.
After doing good and not interfering with everyone for a few weeks, Sir Topham Hatt lets Diesel work on the mainline once more. After coming back, Diesel finds Thomas and Percy talking to Stephen and tells them all about Stephen's accident. When Stephen doesn't deny this, Thomas and Percy are shocked and ask Stephen all about it.