Federal bureaucratic problems with California\u2019s Property Assessed Clean Energy (PACE) plans to finance efficiency retrofits are leading the call for ratepayer-backed on-bill financing. Bankers are more comfortable with the latter, according to stakeholders at a Feb. 8-9 California Public Utilities Commission workshop. Debt subordination--who gets paid first and second--is the issue with PACE. If PACE-style financing is used, local and state agencies would have to seek funds to originate the loans to be paid back through property tax liens. Not only do local entities have difficulties raising funds, the Federal Housing Finance Agency in 2010 ruled that such financing is unacceptable to federal mortgage lenders. With on-bill financing being considered by state regulators, debt subordination issues dissolve, according to stakeholders, because financiers have the backing of investor-owned utilities in place of individual property owners. Utilities would aggregate the loans, find the underlying funds, and arrange for repayment through monthly bills. According to bank representatives at the workshop, utility backing is satisfactory to free up funds.