The rule at our gym is you move up if you have all the skills. There is almost no up-training during the competition season. But as soon as the season ends, around April, the up-training starts and goes on until the end of August. At the end of August the decision is made who will be competing what level. If you have all the skills, you move up, if not you repeat the previous level. In rear cases, if a girl acquires the skills in the middle of the season, and it's early enough in the season for her to compete, she will be allowed to move up. That's what happened to my DD this year. She didn't have FHC at the end of August, so they kept her at level 2. She competed three meets as level 2, and now moved up to L3.
I wouldn't mind her staying at a lower level and have a successful season, if they allowed any up-training. What bothers me the most is that once they put you in a level, you are only allowed to practice that level's skills (except for an optional extra practice once a week). She would simply be bored practicing the skills that she's already getting 36-37's on for the next 4-5 months.