The AC electric arc furnace (EAF) is becoming a core apparatus of the modern steel industry. Nevertheless, it used to be a major threat of power quality in the traditional power supply system. In this paper, a flexible power supply system of the AC EAF is proposed, which is expected to completely alter its inherent cognition of impact load in the power grid. The basics of the power supply for EAF are first reviewed and the novel techniques to enhance the operation flexibility of EAF are introduced. The power circuit and the control structure are then presented, followed by the detailed strategies of various operations fully considering the features of EAF. A large disturbance stability criterion based on the mixed potential theory is also established for the practical application. Both electromagnetic transient simulations using PSCAD and benefit analyses verify the feasibility of the proposed system.