Manitoba's auditor general will not take part in a special audit of Manitoba Hydro and has handed a file alleging mismanagement at the Crown corporation back to the provincial ombudsman's office.

Carol Bellringer's office made the announcement Tuesday.

'This is really an issue of maintaining perceptions.'— Hugh McFadyen, Conservative leader

The NDP government ordered a special audit of Hydro in late October after a former consultant lodged a whistleblower's complaint about the power company's risk-management strategies with the provincial ombudsman.

The whistleblower, who has not been named, alleged that Hydro is miscalculating how much power it can generate and sell, and that the province could face significant blackouts in the future. She also alleged mismanagement has cost Hydro more than $1 billion.

Hydro's CEO, Bob Brennan, has rejected the allegations.

Bellringer was on the board of directors for Manitoba Hydro in 2006, when the whistleblower was under contract to the Crown corporation.

Bellringer also chaired Hydro's audit committee in 2004 and 2005, examining data immediately after the period when the whistleblower alleged that mismanagement, combined with a drought, led to the loss of more than $400 million.

Bellringer's office said Tuesday that "due to the sensitivity" of addressing the whistleblower's complaint, the file would be returned to and followed up by the ombudsman.

The move comes one week after the Progressive Conservative Opposition urged Bellringer to step aside, citing concerns she was in a conflict of interest with the Hydro file.

Conservative Leader Hugh McFadyen applauded Bellringer on Tuesday.

"These are hard decisions to make … I give her credit for making a hard decision," McFadyen told CBC News.

McFadyen said his party's call for Bellringer to step aside had nothing to do with concerns about the integrity of her office, which he said is completely intact.

"This is really an issue of maintaining perceptions," McFadyen said.

The ombudsman's office has not yet said how it will proceed with the audit.

But McFadyen said he is confident the ombudsman can retain an independent outside auditor with the technical knowledge of the power industry to conduct a proper review of Hydro.