Thanks for everyone's questions, comments and thoughts. I've already emailed the manufacturer (SnH Grills owner) with my thoughts and pics.
After removing front panel to inspect and looking at wires, auger housing, controller housing, and not seeing any visible wire damage, only heat discoloration, I believe this was the start of an auger fire.
I was cooking low temp for a long time yesterday. The fan did not blow out the ash in the burn pot and it piled up (it was always on, but only ran low to medium front what I could tell, and not on high very often).
The ash piled up high enough over time to back up the pellets on the pellet slide/ramp where they started to burn. Flames started shooting out where the ramp meets the end of the auger tube, and the fan was strong enough to force enough air pressure to push flames out of this small gap. There is evidence of pellets that starting to burn in the auger, but they just smoldered out.
First pic, you can see the discoloration from the flames. This piece goes in front of the fan.
Second pic, no damage to wires going to fan (white) or the ignitor (red). (Edit: but you can see the discoloration on the auger tube from the flames).
3rd pic, uh-oh...the ash is clogging up the burn pot holes! But the red wires going to ignitor look OK.
4th pic, yep, the burn pot is full of ash, covering all the holes almost to the top! AND, you can see how it backed up creating a trail to the pellet slide/ramp that comes down from the auger tube!
5th pic...look at the pellet slide/shoot/ramp. It's got burnt pellets, AND you can see burnt pellets at the end of the auger way up top in the back.
6th pic, charred remains of pellets that I was able to sweep from the pellet slide/ramp with a toothbrush.
7th pic, I scraped off as much as I could off of that pellet slide.
8th pic...discoloration from the flames on the bottom of the auger tube that leads to the pellet ramp/slide.
9th pic...this is where I believe the flames were shooting out of...there is gap where the auger tube ends and meets the pellet ramp. This small opening allowed for forced air to push out the flames from lit pellets on the ramp leading to the auger. Once I cut power to the fan, the flames stopped. Pellets just smoldered out.
Everything ran just fine this morning at 350*. No flames shooting out, and the shutdown seemed to go ok.
Lesson: On long cooks at LOW temps (<230*) I need to be mindful of ash build up and take a moment to empty out the burn pot. Although I wanted this type of pellet drop system because I thought it reduced the likelihood of an auger burn back, it can happen (and I believe I've read a few posts of this happening to Memphis owners).