The publicly-owned water company saw revenues tick up 1% to £1.1 billion, its annual report for the year to March 31 revealed.
Stripping out an £83m gain the organisation recorded last year after the Government allowed pension increases to be tied to consumer prices index inflation as opposed to the typically higher retail prices index inflation, the surplus fall was 26.8%.
Scottish Water chief executive Richard Ackroyd, who saw his remuneration package rise 8% to £380,000 after securing a £105,000 bonus for hitting targets, said: "The average household charge at £324 is the lowest in the whole of the UK water industry, achievable through our continued efficiency.
"While it is right to help our customers in these financially challenging times by freezing charges the board of Scottish Water is of the view that, in the future, this issue will need to be balanced with ensuring that Scottish Water has adequate revenues to continue the programme of proper maintenance of our assets."
He added: "Surplus before tax reduced by £39m to £107m reflecting primarily the benefits of around £34m to household customers of freezing household charges at a time when the retail price index was 4.5%."
Scottish Water, which marks its 10th anniversary this year, said its average bills were £52 lower than those England and Wales,
Its rates have been frozen for the fourth successive year for 2013/14.
A decade ago bills were typically £30 a year higher than south of the Border, the company said.
The company invested £491m in its network last year, part of £2.5bn earmarked for five years to 2015.
Scottish Water added that drinking water quality in Scotland is at an all-time high of 99.86% of all tests.
Mr Ackroyd said: "Increased value for money for all our customers has been achieved through continued efficiency and reducing costs while at the same time driving up customer service."