Are the books she gets 'decodable' ones or old style 'look and say' books? I shall assume for now that they are 'decodable' ones, so practise specific PGCs rather than work with picture clues and repetition/memorisation.
In principle (by law, some would say; this is statutory I believe), the books should be matched to her phonics abilities, and from your description I surmise that your DD basically knows her phonics (explicitly or implicitly) and can decode 'anything', or she wouldn't be reading above level 6/orange (that's about as far as 'decodable' book stages go). OR she reads by sight/word memorisation and does not actually 'get' phonics properly yet.
In the latter case, her reading books might be perfectly matched to her phonics abilities. You would do well to use the books as 'phonics practice' rather than for 'reading', if reading to her basically means memorising the words on the page/drawing on her memories of the words to be able to decide what they say. Even if she has memorised so many words that she appears to be able to read well, she will run into problems sooner or later (regarding spelling for example) if she doesn't crack the phonics too. There is a limit on the number of words a person can memorise.
In the former case, if perhaps she learned to read by sight, by memorising, but has basically worked out the phonic code by herself. Or has been taught by someone outside of/before school. (So she basically 'knows' phonics and therefore can read anything.) Making that knowledge explicit/practising and consolidating it still has value, so phonics lessons at school are not a waste; but she should not need a lot of practice, so should be able to move through the levels pretty quickly.
Has she been on 'blue' for a while? (Can't have been too long seeing as she must be in reception.) If it has only been a few weeks (and the same for previous levels) then chances are, the teacher is moving her through the levels quickly and the school books will soon 'catch up' with what she reads at home. As long as she is moving through the levels quickly, I wouldn't worry too much about any discrepancy between school books/home books. E.g. if she moves on to green soon, then onto orange after maybe 3 weeks, then onto turquoise around Easter, she'd pretty much have caught up. I don't know how open-door your school's relationship with parents is, but this does not seem a battle worth fighting.
Or, sadly, it could be that the teacher just has an inflexible approach to reading levels and e.g. doesn't allow reception children to go beyond a certain book band or something. In which case you can try talking to them, but I wouldn't get my hopes up about achieving much.
And if the books she is getting are not phonics books at all, then really from what you say, they are pointless for her. So it would be worth having a chat with the teacher, especially if she is not being moved through the levels quickly. If you have a decent teacher who just happens to have to work with non-decodable books (or to be a phonics refuser), they might agree with you after having been told what your DD reads at home, and after having heard her read/assessed her themselves, and simply move her up to a more appropriate non-decodable level. If you are less fortunate, they might insist on some principle (every child must read every book, or, in reception they cannot go beyond x level) and so your efforts would probably be fruitless.
In any case, your DD has the support from home and is being given interesting and appropriate and challenging reading material (by yourself) so in the long run, it will make little difference to her. In contrast, I feel sorry for early readers that get stuck on interminable Biff Chip and Kipper but don't have access to other books/don't have support from home.