Michelle,
If your daughter has not had any formal spelling thus far, I would be inclined to use List 1 with her this year. Then the following year, I would use List 2. The spelling lessons are meant to get kiddos picturing the words in their minds, so the years of spelling practice are honestly as much about developing that skill as they are about actually teaching kiddos how to spell the words.
I think it helps to have two years of the spelling lists prior to heading into studied dictation, just to also be sure that your child knows the frequently used words that are on the first two lists. My second son missed only a couple of words all year when he did List 1 and the same was true the following year when he did List 2. It was great review, and he remains an excellent speller today as he heads into grade 6.
That just happens to be my philosophy on spelling, but yours may differ. Do what you think is best!
Blessings,
Carrie