The CEB has also been directed to come up with a plan to pay interest on customer security deposits held by the power firm. The power utility has agreed submit information on customer deposits by April 30.
The Public Utilities Commission of Sri Lanka said penalty interest currently at 2.0 percent a month had been cut to 1.24 percent.
The regulator said the interest rates would henceforth be based on a formula indexed to money market interest rates.
Sri Lanka's bank interest rates have been high over the past year due to heavy borrowing by state energy enterprise, especially Ceylon Petroleum Corporation.
Until recently some state banks have been borrowing fixed deposits as high as 18 percent a year which are believed to have been on lent to cash hungry state entities at rates in excess of 20 percent, considering a reserve cost of 8 percent, according to banking sector sources.
Sri Lanka's interest rates spiked over late 2011 and 2012 as state energy utilities borrowed from the banking system to cover mainly subsidized power as rains failed.
The loans, which were ultimately accommodated by central bank credit (printed money) eventually, pushed Sri Lanka into a balance of payments crisis, making the rupee weaken from 110 to more than 130 to the US dollar.
The regulator said a period of 30 days has been given for customers to settle bills and it is their responsibility to do so in time.
The regulator has also stopped penal interest from being charged after a subscriber has been disconnected for not settling the bill.