If all of the APs are stating that they are at power setting 1 you do not have a really good density of APs for this deployment to enable the LWAPP auto RF to assign power and channel. Under monitor, access point. Select an AP and then look at its transmit/receive neighbors and you need to see at least 2 APs with -70dbm or better for auto RF to work. If it is not there then you will only be able to manage power manually.
To do this, go to wireless, b/g APs, configure pull down, and set the power there. The lower the number the more power. 1 is full power. 2 is roughly 50%, and so on.
Apply any changes then save the configuration to memory or else it will be lost on reboot of the controller.