In my case (see above post about SAS downgrade), I would have been satisfied to receive miles as compensation and I had even proposed that solution in one of my earlier correspondences. However, I had booked the award ticket using miles from a partner airline, not with SAS, so I presume that SAS was not set up to obtain miles from a partner airline, because SAS did not accept my suggestion. I'm not sure what kind of deal, if any, that an airline would have to obtain miles from a partner airline.
Often1 makes a good point, though. If following the letter of the law, the word "price," which is used in the legislation, could apply to either points or cash--both are currency.
There are a couple of other points that I should have added in my above post. Article 3.3 of the law directly states that the scope of the law applies to both flights paid in cash and to award flights (see red text below):
Article 3
Scope
1. This Regulation shall apply:
(a) to passengers departing from an airport located in the territory of a Member State to which the Treaty applies;
(b) to passengers departing from an airport located in a third country to an airport situated in the territory of a Member State to which the Treaty applies, unless they received benefits or compensation and were given assistance in that third country, if the operating air carrier of the flight concerned is a Community carrier.
2. Paragraph 1 shall apply on the condition that passengers:
(a) have a confirmed reservation on the flight concerned and, except in the case of cancellation referred to in Article 5, present themselves for check-in,
- as stipulated and at the time indicated in advance and in writing (including by electronic means) by the air carrier, the tour operator or an authorised travel agent,
or, if no time is indicated,
- not later than 45 minutes before the published departure time; or
(b) have been transferred by an air carrier or tour operator from the flight for which they held a reservation to another flight, irrespective of the reason.
3. This Regulation shall not apply to passengers travelling free of charge or at a reduced fare not available directly or indirectly to the public. However, it shall apply to passengers having tickets issued under a frequent flyer programme or other commercial programme by an air carrier or tour operator.
I also should have added to my above post that, even if one is on solid ground with the 261 law, one should be ready for foot dragging on the part of the airline. I'm sure many folks just give up. Qualifying for compensation under the law is one thing. Enforcement is another.